Angara encourages better investment through REIT

With our continuously improving economy, Senator Edgardo J. Angara today highly encourages investment on income-producing real estate assets.

"The good thing about this is that it is not a new concept. Since early 2000, governments around Asia have been actively promoting the real investment trusts and the private sector responded positively to this measure," said Senator Angara.

"However, it is high time to introduce REIT in the Philippines especially now that we have a strong real estate industry, which was driven by the influx of remittances from Overseas Filipino Workers, the boom of tourism, and the growing number of offshoring businesses in the country," he added.

In Asia alone, the market capitalization of Real Estate Investment Trusts (REIT) total at least US$50 billion as of August 2006. Within a span of five years the number of REITs has grown from five in 2001 to 80 in August this year.

As one of his priority bills, Senator Angara stressed that the introduction of REITs is expected to facilitate more foreign direct investments in the country. Successes of REITs in Australia, Hong Kong, Japan and Singapore have encouraged more investors in REITs.

"REIT will not only allow the country to participate in the globalization of the real estate investment markets but it will also contribute to the growth and development of the capital market and the country through increased investment activities," said Senator Angara.

Under his proposed bill, a REIT is a stock corporation that invests in income-producing real estate assets like apartments, office buildings, warehouses, and the like. It allows the direct returns of real estate in a securitized form by providing a structure for real estate investments similar to how mutual funds manage stock investments.

It will provide income to both investors and the national government. REITs are also exempted from corporate income taxes; however, firms must distribute 90% of their net income, which may be taxable by investors.

Moreover, REITs level the playing field for real estate actors by allowing small and large investors alike with the opportunity to participate directly in the ownership and financing of large-scale real estate projects at affordable rates of investment, without the disadvantages of illiquidity, high transaction and management costs, as compared to traditional private real estate ownership.

Through REITs, Senator Angara envisions our country to create a niche in the global real estate market.